Mortgage And Lending
First time buyers and Excessive Mortgage Fees
Mortgage loans are not without their pitfalls, and for the first time buyer mortgage market is no different. First time buyer mortgage applicants who are unable to put down a deposit on a property will be hit with hefty fees and higher interest rates by some leading lenders.
While banks and building societies seem to be helping first time buyers get on the property ladder by issuing the first time-buyer Mortgages lend up to 100% of the property value, borrowers are forced to pay higher loan fees on these products, which can cost around 1,500 £, and are unable to access the cheap rate deals offered to other borrowers.
Borrowers who have the required deposit is able to ensure mortgages with interest more than one percent lower than the first time buyer mortgage products available through the same lenders.
First time buyers is widely considered to be the borrowers who can least afford to pay such expenses when applying for a mortgage. Recognizing this, many Mortgage Lenders now stopped charging higher lending fees on their first-time buyer mortgage products because of the extra financial burden.
Some lenders have not scrapped such fees and continue to collect them on mortgage debt products that have loan-to-value ratios above 90 per cent.
The higher lending fee pays for an insurance that protects the lender if the home is repossessed and the bank makes a loss on selling it. It does not, in Contrary to popular belief, giving no protection to the borrower.
With the average property price in an all-time high, the majority of first-time buyers struggling to find the traditional 10 percent deposit is required to purchase a property that would prevent them from paying a higher lending charge.
For the first time buyers who manage to save a portion of the ten percent deposit required, they may still be required to pay a higher lending charge.
For example, if a buyer had a 5 per cent deposit for a house worth £ 100,000, they would require a £ 95,000 mortgage. For the money borrowed over 75 percent of the property price, £ 20,000, the bank will charge a higher lending fee.
Some lenders permit fee to be added to the mortgage, but interest will be granted in the above loan, which could double the cost of the higher lending fees in the long term.
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